On December 31, 2019, the statement of financial position of Twitter Corporation showed the following property and equipment after charging depreciation: Building P3,000,000 Accumulated depreciation (1,000,000) P2,000,000 Equipment 1,200,000 Accumulated depreciation (400,000) 800,000 The company has adopted the revaluation model for the valuation of property and equipment. This has resulted in the recognition in prior periods of an asset revaluation surplus for the building of P140,000. The company does not make a transfer to retained earnings in respect of realized revaluation surplus. On December 31, 2019, an independent valuer assessed the fair value of the building to be P1,600,000 and the equipment to be P900,000. The building and equipment had remaining useful lives of 25 years and 4 years, respectively, as of that date. The revaluation surplus as of December 31, 2020 is Group of answer choices P140,000 P100,000 P75,000 P0
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On December 31, 2019, the
|
Building |
P3,000,000 |
|
|
Accumulated depreciation |
(1,000,000) |
P2,000,000 |
|
Equipment |
1,200,000 |
|
|
Accumulated depreciation |
(400,000) |
800,000 |
The company has adopted the revaluation model for the valuation of property and equipment. This has resulted in the recognition in prior periods of an asset revaluation surplus for the building of P140,000. The company does not make a transfer to
On December 31, 2019, an independent valuer assessed the fair value of the building to be P1,600,000 and the equipment to be P900,000. The building and equipment had remaining useful lives of 25 years and 4 years, respectively, as of that date.
The revaluation surplus as of December 31, 2020 is
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